ABC COSTING METHOD

Abstract

Activity-based costing (ABC) resulted from the outdated and unreliable information about the cost price and cost calculated in the traditional costing systems. ABC method of calculation is based on general production costs that are the main reason for switching from traditional methods of costing to the ABC method. To calculate the exact cost, theory and practice developed method for cost accounting based on activities (ABC). The cost accounting system puts emphasis on activities as main drivers of overhead costs, and uses them to calculate these costs and their allocation to the final cost centers. Calculation based on the activities is a system, which includes improvements to the cost accounting system based on cost centers. Costing based on activities is simultaneously, also, a cost accounting system based on cost centers. Today's business conditions require better costs monitoring. Using of the ABC method, which monitors and allocates the costs of the activities, allows to achieve it. By applying the ABC method one does not give up the traditional system of costs monitoring. ABC method complements the information allowing a regular distribution of costs. Costing by ABC method is of great importance to identify opportunities for improving of the efficiency of the production process.